Tunis Business School Spring 2019

Tutorial 1: Linear Programming

Problem 1:
A TV-Radio Store must determine how many TVs and radios to keep in stock. A TV requires 10 sq ft of
floor space, whereas a radio requires 4 sq ft; 200 sq ft of floor space is available. A TV will earn $60 in
profits, and a radio will earn $20. The store stocks only TVs and radios. Marketing requirements dictate
that at least 60% of all appliances in stock be radios. Finally, a TV ties up $200 in capital, and a radio,
$50. The store wants to have at most $3,000 worth of capital tied up at any time. Formulate an LP that
can be used to maximize the store’s profit.

Problem 2:
A middle class family has a limited food budget, so the parents are trying to feed the family as cheaply
as possible. However, they still want to make sure their family members meet their daily nutritional
requirements. They can buy two types of food. Food1 sells for $7 per pound, and each pound contains 3
units of vitamin A and 1 unit of vitamin C. Food 2 sells for $1 per pound, and each pound contains 1
unit of each vitamin. Each day, the family needs at least 12 units of vitamin A and 6 units of vitamin C.
Formulate a linear program to help the family meet their weekly nutritional requirements with the
minimum possible budget.

Problem 3:

A factory produces sports cars and sedans. There are 3 workshops, where cars of both types are
produced simultaneously.
Workshop 1: Engine Assembly: Installing an engine requires 3.5 hours of labor for a sedan and 4
hours for a sports car .This workshop has 1500 available labor hours each month.
Workshop 2: Body Assembly: Car body assembly. A sedan body requires 2 hours of labor, whereas a
sports car’s requires an additional hour. This workshop has 2000 available labor hours each month.
Workshop 3: Final Assembly: it takes 1.5 hours to assemble a sedan, and an additional 30 minutes
for a sports car. This workshop can assemble all the parts produced in workshop 1 and 2.
If we do not account for labor costs, a sedan yields a profit 2345$ and a sports car yields 3456$. Labor
hours cost: 16$ each in workshop1, 15$ each in workshop 2 and 12$ each in workshop 3. Finally, it is
necessary to produce at least 120 sedans per month

Formulate a linear program to plan the monthly production of sedans and sports cars such that profits
are maximized.

Problem 4:

An investor has $300,000 that can be invested. In addition to the money at hand, it is possible to
borrow up to $100,000 at 12% interest. This money can be used for leveraging (borrow to invest). The
investor has six alternatives, shown in Table 1. The table also shows the expected annual interest or
dividend for the investment alternatives, the expected annual increase of the value of the investment,
and an indication of the risk of the investment (per dollar).
The investor attempts to maximize the expected value of the assets at the end of the planning period
(one year). The value of the assets after one year equals today’s value of the investment plus the
expected interest or dividend plus the expected change in value within a year minus the amount of
money that was borrowed (principal and interest). In addition to the restricted availability of money
already mentioned above, the decision maker faces the following constraints:

• The expected value of assets (exclusive interest) at the end of the planning period should be at
least 7% higher than at the beginning,
• Invest at least 50% of all the money invested in stocks and bonds combined,
• Invest no more than 20% of total amount available (excluding the amount borrowed) in real estate
and silver combined, and
• The average risk of the portfolio should not exceed 10.
Formulate the problem as a linear program.

Problem 5:

A large company seeks to expand and has issued internally a call for proposals for expansion projects
for a planning period of 5 years. The management has retained five projects. Every project has an
annual cost and is designed to produce a benefit after five years. Table 1 below gives a list of the
projects and their expected benefit after five years:

Table 1:
Project Expected Benefit (in million $)
1 10.8
2 4.8
3 3.2
4 4.44
5 12.25

The forecasted annual costs for each project for the next 5 years and the funds available each year are
summerized in table 2.

Table 2: Annual costs of projects and available funds (in million $)

Project Year 1 Year 2 Year 3 Year 4 Year 5
1 1.8 2.4 2.4 1.8 1.5
2 1.2 1.8 2.4 0.6 0.5
3 1.2 1.0 0 0.48 0
4 1.4 1.4 1.2 1.2 1.2
5 1.6 2.5 2.5 2.0 1.8
Funds 4.8 6.0 4.8 4.2 3.5
 1) Formulate a linear program that would help the management decide which expansion project(s)
to undertake in order to maximize the total net benefit after 5 years
2) Modify the LP from question (1) to consider each of these independent conditions separately
(one by one):
a) At least one of the projects 1 and 2 must be accepted
b) At most one of the projects 1 and 2 must be accepted
c) Project 3 cannot be accepted unless project 2 is accepted
d) Project 3 cannot be accepted unless at least one of the projects 2 and 4 is accepted
e) Project 2 cannot be accepted unless at least two of the projects 5,3 and 4 are accepted
f) 3 projects at most must be accepted
g) At least 3 projects must be accepted

Problem 6:

A police department has five detective squads available for assignment to five open crime cases. The
chief of detectives wishes to assign the squads to the cases so that the total time to conclude the cases
is minimized.
The average number of days, based on past performance, for each squad to complete each case is as
follows:
Case 1 Case 2 Case 3 Case 4 Case 5
Squad 1 14 7 3 7 27
Squad 2 20 7 12 6 30
Squad 3 10 3 4 5 21
Squad 4 8 12 7 12 21
Squad 5 13 25 24 26 8

Each squad is composed of different types of specialists, and whereas one squad may be very effective
in certain types of cases, it may be almost useless in others.
Formulate an LP to help the police department assign the squads to the cases.

Problem 7:
A Company sells bags of oranges and cartons of orange juice. The company grades oranges on a scale
of 1 (poor) to 10 (excellent). The company now has on hand 100,000 lb of grade 9 oranges and
120,000 lb of grade 6 oranges. The average quality of oranges sold in bags must be at least 7, and the
average quality of the oranges used to produce orange juice must be at least 8. Each pound of oranges
that is used for juice yields a revenue of $1.50 and incurs a variable cost (consisting of labor costs,
variable overhead costs, inventory costs, and so on) of $1.05. Each pound of oranges sold in bags
yields revenue of 50¢ and incurs a variable cost of 20¢. Formulate an LP to help maximize the
company’s profit.